SEBI introduced one selling mode for companies by name ‘OFFER FOR SALE” in short we can call this as OFS.
What is OFS: OFS facilitates the promoters of an already listed company to sell or dilute their existing shareholdings through an exchange based bidding platform. For example, very soon SAIL will come out with OFS offer. Govt of India is a promoter for the said company. It wants to dilute its share in SAIL and quickly wants to sell the shares in the market for creating fund for development activities by this disinvestment.
Who can Participate: Except the promoters of the company, all market players can bid/participate in the OFS process.
- The buyers need compulsorily demat account to participate in OFS and non-institutional investors should have full amount in credit for the shares to be purchased. There will not be any margin adjustment under this category. The amount allotted for this purpose cannot be diverted for any other purchases in shares deal. Though it is not mandatory to disclose the floor price before the issue opens, the promoters usually disclose it prior to the share sale. If floor price is indicated, then no bidder will be allowed to quote below this rate.
- Every website of brokers will have OFS section. Those using online trading account have to use the same for placing their bids. Buyers who do not have online trading account, can place their bids by directing the dealer of their broking company to do it on their behalf. The duration of the offer for sale shall be as per the trading hours of the secondary market and shall not exceed one trading day. We can modify or cancel our bids during the offer timings except in the last 60 minutes i.e. till 2:30 p.m.
- Indicative price will be announced by exchange during the last 60 minutes of the OFS. Indicative price is the price which is arrived using the volume weighted average price of all valid bids. For example, if bidders bid for 100 shares at Rs.70 and rest bidders bid for 100 shares at 72, then weighted average price will be Rs.71. This is cited for simple layman knowledge.
- Once the bidding gets over, allotment price is fixed and allocation is done. The successful bidders will be allotted shares directly into their demat account on T+1 basis the very next day. In case of partial allotment or no allotment, the refunds will be made on the same day itself. This makes the OFS process really fast, just like buying shares of the company from the open market.
- Contract notes will be issued just like regular purchase of shares from market. Here only bid price and quantity allotted and total value adjusted will be given.